Question

Answer the remaining three questions on the basis of the information below.

A profit-maximizing firm in a perfectly competitive market operates in the short run with total fixed costs of $6,500.00 and total variable costs (TVC) as is below. The firm can only produce integer amounts of output (Q)

Q	TVC
0	0.00
1	8,000.00
2	15,000.00
3	20,000.00
4	23,000.00
5	25,000.00
6	29,000.00
7	33,500.00
8	39,000.00
9	46,000.00
10	53,500.00
11	61,200.00
12	72,000.00

______ 5. (2.5 pts.) How much output should the firm produce if it can sell all the output it produces at a price of $4,650 per unit?

                                    Did you show your work for every question?

Answer 1

Qty = Quantity
TVC = Total Variable Cost
per U = Per Unit
FC = Fixed Cost
TC = Total Cost
SP = Selling Price
Qty (a)	TVC (b)	TVC per U (c = b/a)	FC (d)	TC (e = b+d)	TC per U (f = e/a)	SP (g)	Profit (g-f)
1	8,000.00	8,000.00	6,500.00	14,500.00	14,500.00	4,650.00	(9,850.00)
2	15,000.00	7,500.00	6,500.00	21,500.00	10,750.00	4,650.00	(6,100.00)
3	20,000.00	6,666.67	6,500.00	26,500.00	8,833.33	4,650.00	(4,183.33)
4	23,000.00	5,750.00	6,500.00	29,500.00	7,375.00	4,650.00	(2,725.00)
5	25,000.00	5,000.00	6,500.00	31,500.00	6,300.00	4,650.00	(1,650.00)
6	29,000.00	4,833.33	6,500.00	35,500.00	5,916.67	4,650.00	(1,266.67)
7	33,500.00	4,785.71	6,500.00	40,000.00	5,714.29	4,650.00	(1,064.29)
8	39,000.00	4,875.00	6,500.00	45,500.00	5,687.50	4,650.00	(1,037.50)
9	46,000.00	5,111.11	6,500.00	52,500.00	5,833.33	4,650.00	(1,183.33)
10	53,500.00	5,350.00	6,500.00	60,000.00	6,000.00	4,650.00	(1,350.00)
11	61,200.00	5,563.64	6,500.00	67,700.00	6,154.55	4,650.00	(1,504.55)
12	72,000.00	6,000.00	6,500.00	78,500.00	6,541.67	4,650.00	(1,891.67)
The company can never sell the product in profit hence the selling price is $ 4650
The Total Cost per Unit is always above the Selling price in all the units of production.
Company can sell the product with a least loss is at the production of 8 units (with $ 1037.50 Loss)
The company can only sell the product in profit, only if they increase the selling price above $ 5687.5
Because, $ 5687.5 is the least cost per unit in the above table.